The word “Estate” can have many different connotations depending on who is talking. Some people might link it with wealth, while others may refer to it as a vast collection of property or property that can be “left behind.” Regardless of how the word is defined, Estate Planning is a broad term for managing your estate and its assets for future generations. It also involves the management of an individual’s assets to protect them from taxes, probate, and litigation. It also includes guidance on the division of assets between beneficiaries or heirs upon the death of an owner. Below we will discuss myths and facts behind Estate Planning.
1. You Can do it on Your Own. You Don’t Need an Attorney
A significant part of planning is ensuring that your assets go where you want them to go and are done legally to avoid any unnecessary problems. Estate Planning is a complex process that deals with the passing of property, taxes, and so much more. Your attorney will make sure that your wishes are carried out.
2. An Attorney is Expensive, and it’s Better to Trust the Government
The reality is that attorneys are not expensive. The actual expense of planning your estate happens in taxes. If you don’t plan, the government will do it for you. The cost of missing planning for a few essential years can be extreme. Still, by speaking with an attorney, you can take charge of your financial future and avoid inflated costs and lost deductions associated with penalties or interest charges on non-compliance. The best way to avoid potential problems is to have the right attorney to help guide you through estate planning.
3. Everyone Needs a Living Trust
A living trust is not necessary for everyone; a Will can suffice for most estate planning scenarios. Each person’s estate situation and goals are unique. Consulting with an attorney is the best approach to determine whether a trust is necessary for your circumstances. An attorney can assess whether a trust would be beneficial or unnecessary for your case and how it would impact you financially.
4. Only Aged 55 and Older Need to Plan Their Estates
The truth is everyone who receives an inheritance needs to be prepared. Age 55, however, is the minimum age at which a person may need to look at estate planning options. First, some things are not done until you reach age 59 ½ or longer such as choosing a beneficiary and naming a trust as a beneficiary for your IRA accounts. Second, some things require at least a year’s lead time, like selecting your executor, which will generally be someone already elderly and their family or another trusted individual.
5. Married Couples Should Maintain Separate Estates to Prevent Taxes From Being Levied on Their Assets
Most estate tax planning occurs when the surviving spouse is older than 55 and collecting a large inheritance. However, it’s better to wait and plan for long-term living expenses rather than short-term medical expenses. Though it is technically possible to have separate estates, there are usually tax advantages in having a joint trust that can be available to both spouses. The tax advantages will differ for the two spouses establishing mutual trust. However, they can still work together to find ways to ensure that they maximize their assets while minimizing taxes and state tax assessments.
6. When you die, Your Assets Revert to Your Children
The reality is that some assets do not revert to the original owner’s children after death. The best way to ensure that your children or other beneficiaries receive all of your purchases is to plan to ensure your wishes are carried out. Free planning is available from the government, but it may not be the best fit for your family’s situation. A spouse with a higher tax bracket than their deceased partner may want to talk with an estate attorney about ways to plan for their future and maximize the value of their inheritance.
7. An Estate Plan is Only Necessary if you are Wealthy
The reality is that no one plan for their estate is perfect for everyone. One size does not fit all. Instead, the best way to ensure that your wishes are carried out is to work closely with an attorney who will help you devise the plan that will be best for you and your family.
8. Using a Trust Eliminates Probate and Eliminates Taxes
The truth is that an estate planning attorney can help you with the process of eliminating probate and taxes, but it is not a guarantee. Your attorney can help by removing probate and taxes. However, there are certain instances where the probate court will still determine how to handle your estate and where your heirs may be responsible for a portion of the taxes on your estate. Probate and tax elimination are not absolute. It’s just that, in most cases, they are reduced or eliminated.
9. If you use a Revocable Living Trust, it’s not a Will
The reality is that the living trust does not replace the need for a will and cannot create any new tax benefits like leaving property to your children or grandchildren. It just gives you control over and directs the distribution of your assets to specific people or entities. You’ll need a valid will to maximize your estate taxes and other government liabilities.
10. If you Don’t use an Executor and a Will, you Leave Your Money up to the Government
The reality is that using an executor can be very expensive and sometimes unnecessary. The estate gets settled by the executor, and more often than not, it is not a relief to your heirs. They end up paying the executor’s fee, which may not be cheap. A living trust is a better way to avoid probate court as you can control your assets and property with your beneficiaries and heirs at the time of death.
Ensure that your wishes are carried out and that you get the most value out of your inheritance! You must talk to an Estate Planning lawyer about the best way to plan your estate, including who should receive the inheritance, what will happen to the assets, and how best to pay your bills. They will give you options based on your specific situation and provide a strategy that will be tailored to fit your overall goals in life.